"We need to fix this. None of the council members or I had any idea that this was the situation," she said.

Fox40 reports that officials learned about the illegal enrollment in the state retirement system after a local newspaper columnist discovered the provision in the city charter and told the city attorney, who apparently determined the benefit was improper.

"At this point, I need to look at what the options are and if I have any choices or not," Johnston said.

But Ralph White, an ex-councilman, told Fox40 the options are simple.

"Weighing what options on what?" he asked. "Whether to give the money back, or keep it? Do you wanna be a thief, or does she wanna give the money back? That's the option."

Stockton has been considering bankruptcy while it attempts to balance its finances. Should Stockton take that step, it would mark the largest city bankruptcy in U.S. history.